EY_Progressions_2012_ LS Report_LowRes_FINAL

The third place: health care everywhere
Progressions
Global Life Sciences
Report 2012

Changing behaviors
represents the single
biggest opportunity
to improve health
outcomes.

Consider these recent developments:
• In 2011, as the ﬁrst members of America’s baby boomer
generation reached retirement age and the world’s population
crossed the 7 billion threshold, pundits and policy makers
considered the impact a rapidly aging population would have on
our planet’s scarce resources.
• In September, the United Nations General Assembly convened a
global summit on a health issue that poses an urgent and global
threat. The UN has convened such a summit only once before —
in response to the AIDS epidemic — and it’s remarkable that the
2011 summit focused not on an infectious disease pandemic, but
on the threat of “non-communicable” chronic diseases.
• That same month, the Obama Administration hired Constance
Steinkuehler as a White House senior policy analyst with a truly
unconventional mission: analyze the potential for using video
games to improve outcomes in health, education and a number
of other areas.
What do these developments have in common? They are all
indicators of the narrative we explore in this year’s Progressions.
The looming epidemic in chronic diseases, accelerated by aging
populations and increasing prosperity, is threatening to overwhelm
health care budgets and economic growth. Today — half a century
after the first polio vaccine, four decades after declaring war on
cancer, 30 years after the emergence of AIDS and the elimination of
smallpox — we have tamed the most devious scourges that humanity
has ever faced. What threatens us now is what should be the easy
stuff — controlling our diet, exercising, drinking in moderation,
taking our medicines.
Changing such behaviors represents the single biggest opportunity
to improve health outcomes while bringing costs under control.
But the “easy stuff” is far from easy. Despite concerted efforts
by policy makers, providers and payers — not to mention the best
intentions of individuals — it has been remarkably difficult to effect
behavioral change.
This year’s Progressions explores these trends and their implications
for life sciences companies. As companies find themselves in
the behavioral change business, they would do well to leverage
behavioral economics, a discipline that is rich with actionable
insights on the biases that guide our behavior and on the levers —
from the immediate feedback of social networks to the rewards of
games — that actually work. We examine behavioral economics in
Chapter 2. But this is not just about patients’ behaviors. Companies
will need to change the ways they operate as well — to significantly
extend their business models with more patient-centric value
propositions and enduring relationships with patients. Chapter 3
explores these implications and calls for courageous leaders to set
strategic direction, inspire innovation and stay the course. Lastly,
we will need behavioral change across the health care ecosystem.
In Chapter 4, we examine “collective impact” alliances, which
could help address these challenges by aligning the incentives of
individual stakeholders, creating common metrics, encouraging
cooperation and redefining and broadening the “precompetitive”
spaces where magic can happen.
This year’s Progressions builds on themes we have explored in the
“Pharma 3.0” reports of the last couple of years. But it also marks
an important departure. As we discussed these trends with our
clients, it became increasingly clear to us that they affect all of life
sciences. So we have listened to our customers and changed our
behavior: this year, Progressions is no longer just a pharmaceutical
report. It is now a report for the entire life sciences sector.
— Ernst & Young, Global Life Sciences Center
To our clients and friends

4 Progressions Global Life Sciences Report 2012
Chapter
Contents
The third place: health care everywhere 12
The next big wave: behavioral change 15
Usama Malik
Bridgewater Associates, LP
Power to the people 17
Diego Miralles, MD
Janssen Healthcare Innovation
The personal health technology revolution 19
Eric Dishman
Intel Corporation
Sensors and sensibilities 20
Stephen Oesterle, MD
Medtronic, Inc.
Listening to patients 22
Itzik Lichtenfeld, Phd
First Life Research Ltd.
Interview
From insights to outcomes 23
Glen Tullman
Allscripts
A closer look
Accessing the markets of the third place 25
Frank Kumli, PhD
Ernst & Young Ltd.
Patients: nudging patient behavior 30
Interview
Nudging the invisible hand 37
George Loewenstein, Phd
Center for Health Incentives and Behavioral Economics at the
Leonard Davis Institute
Interview
Minding patients’ preferences 38
Jerome Groopman, MD
Pamela Hartzband, MD
Harvard Medical School and Beth Israel Deaconess
Medical Center
Behavioral game changers 41
J. Leighton Read, MD
Alloy Ventures
Guiding principles for the behavioral change business 47
Introduction: the behavioral change business 6
one
two

5Contents
Business models: creative disruption 48
Bringing convenience and efficiency to health care 54
June Felix
Citigroup
A closer look
Supply chains for a patient-centric world 56
Mark Yeomans
Ernst & Young LLP
A closer look
Strategic finance drives shareholder value 63
Jeffrey Greene
Ben Perkins
Ernst & Young LLP
A closer look
Mapping strategic transformation 65
Dan Shoenholz
Michael Botos
Ernst & Young LLP
Walgreens’ strategic transformation 66
Alexandra Jung
Walgreens Health Services (formerly)
Guiding principles for business model disruption 67
The ecosystem: aligning for impact 68
A closer look
Patients for life 72
Sanjeev Wadhwa
Ernst & Young LLP
Self-care through collective impact 73
James Firman
National Council on Aging
Index of charts 76
Acknowledgments 77
Global life sciences contacts 78
three
four

ntroduction
The behavioral
change business
Progressions Global Life Sciences Report 2012

7Introduction
Introduction
The behavioral change business
In prior issues of Progressions, we
described two prominent examples
of how changing incentives and
technologies are driving behavioral
change by key stakeholders:
• Patients are being transformed into
“superconsumers.” Technologies
such as social media and smartphone
apps are empowering individuals with
transparent information and greater
control (mirroring trends in online
shopping and banking). Meanwhile,
incentives are driving patients to take
more responsibility for their health
decisions.
• Even as incentives are increasing
for evidence-based approaches,
technologies such as EHRs and social
media are creating an explosion
of data. These two developments
are enabling a trend we termed
“value mining” — the use of data
mining to make determinations
about the relative value of different
interventions.
Superconsumers and value mining are
just two examples of a larger trend that is
part of the move to an outcomes-focused
future: a relative shift in power away
from providers and manufacturers and
toward patients and payers.
The move to a world in which financial
returns will accrue to those who can best
demonstrate that they are significantly
improving health outcomes is also
creating tremendous opportunities for
companies that have historically not been
in the health business. Consequently,
non-traditional entrants — retailers,
information technology companies,
telecommunications firms, etc. — are
actively moving into the health arena.
Over the course of human history, we
have seen two big advances in health
outcomes. The first wave, beginning in
the mid-19th century, came from the
adoption of modern hygiene practices,
which sharply reduced medical infections
and improved post-surgery survival rates.
The second wave, which has lasted for
the better part of the 20th century, was
enabled by breakthrough drugs and
devices — products that have successfully
waged war on numerous diseases, from
smallpox and polio to cancer and HIV.
Today, we stand on the cusp of the third
big wave of improvements in health
outcomes — driven not just by new
products, but by behavioral change.
We are moving to a world in which more
and more emphasis will be on gathering
evidence to identify the interventions
that are most effective at improving
health outcomes, and then realigning the
behaviors of all stakeholders — patients,
providers, manufacturers and others —
around these interventions.
This transformation is being catalyzed
by the simultaneous occurrence of two
forces: the increasingly urgent need to
realign incentives and make health care
costs sustainable (particularly in chronic
diseases, where healthy behaviors such
as diet and exercise could significantly
curtail costs); and the coming of age
of game-changing technologies such
as mobile health, social media and
electronic health records (EHRs). These
two trends reinforce each other: the new
technologies are boosting efficiencies
and sustainability, while changing
incentives are reducing resistance from
stakeholders and encouraging adoption.
Background:
health outcomes and behavioral change

toward commercial model innovation.
Companies will experiment with multiple
business models through a “commercial
trials” process and through radical
collaboration with non-traditional
entrants. It will become increasingly
important to pay attention to how
companies might ﬁt into other industries’
evolving business models.
• Connecting information. Information
is the currency of 3.0. As health care
enters the world of “big data” and
the “internet of things,” the ability to
connect disparate information from
diverse sources and extract insights
becomes a core competency and driver
of competitive advantage. Information
technology is strategy, not overhead.
• Co-creation and community
engagement. Co-creation of value
with patients, payers, providers and
partners will become a key value driver.
In social media and other communities,
pharma companies will need to engage
meaningfully with stakeholders in open
and transparent ways.
Pharma’s
perspective:
the progression of
Progressions
So far, we have written about these changes
through the lens of big pharmaceutical
companies, because this shift is particularly
compelling for big pharma, which has
been grappling with historic changes for
some time now. For the better part of a
decade, numerous forces — the patent cliff,
reduced R&D productivity, pricing pressures,
globalization and demographics — have made
the industry’s long-standing blockbuster
business model increasingly irrelevant.
These pressures drove a transition we now
refer to as the move from Pharma 1.0 (the
vertically integrated blockbuster model) to
Pharma 2.0 (today’s models based on more
diversified market portfolios and a broader
focus on bottom-line returns rather than just
top-line growth). This shift was explored in
depth in the 2006–09 issues of Progressions,
where we covered topics such as emerging
markets, drug safety, new business models
and finance transformation.
For pharma, then, the move to an evidence-
based, outcomes-focused, behavior-driven
world represents the third transformation
of its business model, one we referred to as
Pharma 3.0 in the 2010 and 2011 issues
of Progressions. In these two reports, we
highlighted several implications for pharma
companies, including:
• Business model innovation. Innovation
is no longer just about products, but
increasingly about business models.
This will require rebalancing resources
away from product innovation and
• Getting to 3.0. Lastly, getting to 3.0 will
not be automatic. It will take coordinated
change to metrics, standards, cultures
and mind-sets. To gain acceptance as
aggregators at the center of the system,
pharma companies will need to articulate
their strengths and address perceived
conﬂicts of interest.
Much of this thinking was summarized
in a schematic we referred to as the
“House of 3.0,” which identifies three core
competencies (connecting information
for competitive advantage, radical
collaboration and managing multiple
business models) that needed to be built
to complement companies’ 2.0 strategies,
structures and initiatives. It also lists several
business processes — from business model
development to community engagement
and ecosystem risk management — that
needed to be substantially enhanced or
built anew.

9Chapter one
Customer-centric; B2C
Innovative partnerships
Listening and co-creating
Customer experience
Health outcomes for
patients and health systems
Business model
Inorganic growth
Go-to-market strategy
Brand value
Value drivers
Product-centric; B2B
Acquisition of product
companies
Pitching
Product efficacy
Revenue and margins
Reimbursement based on
real market effectiveness
Information
Approval based on
clinical data
Business model innovationInnovation Product innovation
Pharma 3.0: the shift from products to health outcomes
Source: Ernst & Young.
Pharma 2.0
Diversified product portfolios
Pharma 3.0
Health outcomes
move to an
evidence-based,
outcomes-focused,
behavior-driven
world
Introduction

• Companies: motivating creative
disruption. It is time to move beyond
experimentation at the fringes. Life
sciences companies need to significantly
extend their business models with more
patient-centric value propositions and
enduring relationships with patients.
The business models of the third place
will be data-centric, behaviorally savvy,
experience-focused, holistic and revenue-
flexible. But companies will need to
move quickly — the pace of change is
accelerating, and a fast-follower strategy
is not recommended. They will need
courageous, curious and skilled change
agents to marshal the resources needed
for disruptive innovation and stay the
course through ensuing failures and
uncertainties. See Chapter 3 for more.
• Ecosystem: aligning for impact.
Health care’s stakeholders —
governments, regulators, employers,
payers, nonprofits — are aware that the
system is broken and that we need a
new system for delivering, consuming
and paying for care. In Chapter 4, we
examine “collective impact” alliances,
which have tremendous potential for
taking on such issues by developing
a shared vision, aligning incentives,
creating common metrics and more.
By shifting the understanding of the
business that companies are in, collective
impact alliances have the ability to
redefine “precompetitive” spaces and
allow for a radically improved allocation
of resources. As non-traditional players
enter health care and patients are
increasingly empowered, collaborations
with a wide range of actors can better
align interests to address some of the
most stubborn obstacles to making
health care sustainable. •
This year’s
report: health care
everywhere
As mentioned on page 7, we are in
the midst of a dual shift in power
toward patients and payers. This year’s
Progressions examines the first half of this
shift: the patient, who is both increasingly
empowered and increasingly central to
making health care sustainable.
The key to making health care sustainable is
addressing the growing challenge of chronic
diseases. These already account for 75% of
health care costs, and still the problem is
projected to escalate dramatically thanks to
demographic and macroeconomic trends.
A critical component for bringing these
costs under control will be the move to a
health care-everywhere future in which care
is more patient-centric, self-managed and
delivered in more disaggregated settings.
We refer to this as the move to health
care’s “third place” — an expansion beyond
the first two places in which care has
traditionally been delivered, the doctor’s
office and the hospital.
Once again, changing technologies and
changing incentives are playing a central
role in changing behaviors. Technologies
such as smartphone apps, sensors,
remotely connected monitors and social
media are empowering patients to manage
their care wherever they are located.
Meanwhile, payers are embracing holistic
approaches, thereby boosting incentives
for remote care, home care, preventive
monitoring and more. Models such as
accountable care organizations are also
shifting financial risk to providers — who will
have to understand patients and influence
their behaviors in order to successfully
manage this risk.
The bottom line is that to be a successful
player in the health care arena, a company
needs to be in the “behavioral change”
business. Success will in part be based
on the ability to change the behaviors
of patients, companies and the system
as a whole:
• Patients: nudging patient behaviors.
Boosting adherence, bending the cost
curve and shifting from treatment to
prevention will require dramatic shifts in
patient behavior. But patient behaviors
have so far been notoriously resistant to
change. The definition of personalized
medicine may need to be expanded — it
will no longer be just about genetics and
targeted therapies but will also involve
understanding behavior and customizing
the individual experience. In Chapter 2,
we explore how to leverage lessons from
behavioral economics — a discipline that
has come into its own in recent years
and is replete with actionable insights for
health care and other industries.
ave the ability to
petitive” spaces and
y improved allocation
on-traditional players
and patients are
wered, collaborations
of actors can better
ddress some of the
stacles to making
nable. •

11Introduction
Source: Graphic recording of DesignShop®
session held on 4 January 2012, drawn by Andy Parks of Optum DesignShop.
Introduction
addressing the
growing challenge of
chronic diseases
The next wave: the third place in health care

hapterone
The third place:
health care everywhere

13Chapter one
Chapter 1
The third place: health care everywhere
Advancing
health outcomes,
sustainably
Over the last century or so, modern
medicine has made tremendous advances.
Building on the improvements in health
outcomes that first emerged from better
hygiene, waves of breakthrough drugs and
vaccines have alleviated the destruction
waged by once-lethal infections. Long-
standing scourges such as smallpox and
polio have been either entirely eradicated
or hounded to the edge of extinction.
Personalized medicines, sophisticated
imaging and targeted diagnostics have
reduced many cancers from near-certain
death sentences to manageable, even
curable, conditions.
Accompanying these advances — indeed,
to no small extent enabled by them — have
been tremendous improvements in the
quality of human life. We are living longer
than prior generations, thanks to improved
maternal health and the taming of childhood
and other diseases. Incomes and standards
of living have gone up, in part enabled by
the fact that healthier people are more
productive. And as nations once referred
to as “less developed” have opened their
economies and unleashed the productivity
of their citizens, these advances are
spreading to a growing number of
emerging markets.
It is somewhat ironic that one of the
biggest threats to human health (and, by
implication, to our economic security) is
that we are in danger of becoming victims
of our own success. As medical advances
have raised longevity, rising incomes have
reduced family sizes in many parts of the
world, creating demographic time bombs
as fewer workers are available to support
larger numbers of retirees and patients.
As people are living longer, the incidence
of neurodegenerative diseases such as
Alzheimer’s is expected to increase. More
broadly, we are on the cusp of a chronic
disease epidemic, as lifestyle-related
conditions such as heart disease and type 2
diabetes escalate due to aging populations
and growing prosperity in emerging markets.
The numbers are startling. Chronic diseases
account for more than 75% of health care
costs in the US. And while these ailments
are often thought of as “diseases of
affluence,” the facts suggest otherwise.
They already account for more than half of
health care costs in developing countries,
and the World Health Organization expects
that by 2020, 60% of the disease burden
from chronic diseases will occur in the
developing world.
Meanwhile, policy makers in both
developing and developed countries are
attempting to expand access to larger
segments of their populations — adding to
the pressure on costs. The end result is that
health care systems around the world are
becoming unsustainably expensive. Health
care costs, already outpacing inflation,
could crowd out other expenditures and
hurt economic growth. In the US — the
world’s largest health care market, where
health care already accounts for more than
17% of GDP — the Congressional Budget
Office has stated that “the single greatest
threat to budget stability is the growth of
federal spending on health care.”
And in China, health care reforms are
at least partly motivated by the need to
maintain social stability.
In brief
• Health care costs are becoming
unsustainable, in large part due to a
chronic disease epidemic fueled by
unhealthy lifestyles, aging populations
and increasing standards of living.
• To bring costs under control and
improve health outcomes, patients
and other stakeholders of the health
care system will need to change their
behavior.
• To enable these behavioral changes,
the epicenter of the health care system
is shifting from the two places in which
health care has traditionally been
produced, delivered, consumed and
paid for — the hospital and the doctor’s
office — to a third place: the patient.
Health care will become more patient-
centric and ubiquitous — delivered
wherever the patient happens to be.
• This shift is accelerating as changing
incentives are shifting more financial
risk to providers — who will need to
change patient behaviors to manage
this risk.
• Patients — who have grown
increasingly comfortable with
empowering technologies (e.g.,
smartphone apps, sensors, monitors,
social media) — are taking a more
active role in managing their health
and are demanding a different model
in the third place.
• Above all, the third place promises to
change the game in health care —
making costs more sustainable and
providing new opportunities for
growth and value creation.
We are on the cusp of a
chronic disease epidemic, as
lifestyle-related conditions
such as heart disease and
type 2 diabetes escalate
due to aging populations
and growing prosperity in
emerging markets.

141114111
The behavioral
change business
Given these demographic and
macroeconomic shifts and the attendant
epidemic of chronic and non-communicable
diseases, public and private payers are
increasingly focused on improving the
cost/benefit dynamics of the system — which
they can only do by emphasizing prevention
over treatment, and health outcomes over
process. To that end, we believe that the
big advances in outcomes are less likely
to come from breakthrough products
than from another source, one that is
both seemingly simple and promisingly
potent: behavioral change. As eloquently
articulated by Usama Malik in the article
on page 15, individuals’ actions will be the
single largest determinant in the health
outcome equation.
Chronic diseases are frequently referred
to as “lifestyle” diseases, for good reason.
They are often directly driven by specific
behaviors — unhealthy diet, sedentary
lifestyles, weight gain, smoking and
failing to adhere to treatment regimens.
Monitoring and changing such behaviors
could yield tremendous advances in health
outcomes while also helping to contain
costs. Preventing someone from getting
diabetes in the first place, for instance, is
not just better for the patient — it is also
far more cost-effective for the system.
Monitoring chronic diseases in real time is
a similar “win-win,” since identifying and
promptly correcting a declining health
condition (e.g., escalating blood pressure
or blood sugar) is better for patients while
also being more cost-effective than the
alternative of hospitalization. As incentives
change across the system, interventions
that succeed in understanding and
influencing behaviors — toward healthier
lifestyles, real-time monitoring, better
medication adherence and more — will have
the best shot at improving outcomes and
securing payment.
In essence, everybody engaged in health
care will inevitably find themselves in the
behavioral change business.
In essence, everybody
engaged in health care will
inevitably find themselves
in the behavioral change
business.
prevention over
treatment

15Chapter one
The next big wave: behavioral change
In just the last 200 years, humans have doubled life expectancy —
a measure that had barely budged in the previous 5,000 years.
This happened because of two key developments. First, better
sanitation and hygiene contributed to an enormous increase in
longevity. Second, the introduction of modern medicines and
better nutrition, starting in the early 20th century, created the
next big wave of improvements in health and life spans.
But then progress stopped. In fact, recent studies suggest that
we may be the first generation in 200 years to not outlive our
parents — life expectancy might actually drop. What changed?
A big part of the answer is that unhealthy behaviors — such as
smoking, weight gain, poor diets and stress — are exacting an
increasing toll on health outcomes and human longevity.
Going forward, therefore, progress in improving health outcomes
will be renewed by the understanding, application, codification
and democratization of behavior science and behavior
modification. Those who crack the code will not only create
abnormal growth opportunities but also positively contribute to
society in disproportionate ways.
At the center of this transformation are the natural and social
sciences’ study of the human mind and the drivers of both
rational and irrational behavior. As we gain critical knowledge, it is
conceivable that in the coming decades, we may also have some
tools to be able to predict behavior at an individual level based on
various biological and environmental markers. The hope is that
if we better understand the internal triggers (hunger, fatigue,
fear, sadness, etc.) and external stimuli (friends, communities,
environment, etc.) that drive harmful behaviors, we can construct
better incentives to steer consumers toward healthier behaviors.
Yet behavioral change is a complex process requiring significant
personal responsibility and the right balance between
paternalism and individual management of health and lifestyle
choices. Fortunately, myriad tools are available to help with this.
These could include social networks to keep us accountable
and become our cheerleaders, providers from specialists to
retail clinics that engage consumers on a personal level, and
technologies to capture data for patients to help enable healthy
routines and decisions. New incentives, such as financial,
behavioral (commitment contracts, loss aversion, etc.) and
those practices borrowed from other industries that tug on the
emotive nature of humans, can powerfully impact the way all of
us engage with our own health.
Other industries — retail, consumer products, financial services
and even airlines — have been utilizing behavioral economics
for many years, even before formal studies in the field were
widespread. There are scores of examples of powerful brands in
the consumer and retail world that have created an emotional
affinity based on quality, luxury or other elements. Meanwhile,
in the pharmacy industry, major chains such as Walgreens and
CVS have largely displaced the independent pharmacy model,
because customers value convenient access.
Another parallel with other industries is the democratizing power
of technology. From retail to air travel to brokerage, industries
that were once domains where experts and technocrats made
decisions around what consumers should be doing have been
transformed into democratic spaces where technology allows
consumers to make informed decisions for themselves. To
empower patients to change their behaviors, we need to do the
same thing in health care, and new technologies are already
making that possible.
The bottom line is that to take on the next big challenge of
changing patients’ behaviors, companies will need to change
their own behaviors as well. More than ever, life sciences firms
will need to look outside their walls for new ideas and different
approaches — and behavioral economists and customer-centric
models from other industries can provide a useful starting point.
Usama Malik
Bridgewater Associates, LP
Senior Management

These two concepts together lead to a
future that we refer to as the emergence
of health care’s third place. The term
“third place” was coined by sociologist
Ray Oldenburg, whose books The Great
Good Place and Celebrating the Third Place
argue that locations such as cafes, bars,
bookstores and barbershops are essential
for creating a sense of community. He
calls these locations our “third places,” to
distinguish them from our “first places”
(home) and “second places” (work).
Starbucks — which often uses the term
when describing its mission — is one
company that has successfully created a
technology-enabled third place for millions
of city dwellers and laptop warriors.
Starbucks’ value proposition is based
on more than its coffee — the company
has succeeded by providing a complete
community-based experience that includes
wi-fi access, food, music and more.
Third places are not just about attracting
customers to new locations. In health care,
as in many other examples, they have often
been built by going to where customers
already are. Airports, for instance, were
initially designed merely to facilitate travel.
However, it soon became apparent that
airports could be much more — and they
now include shopping malls, food courts,
nail salons, lounges and bookstores.
As health care moves into the realm of its
third place, it will be delivered in diffused
settings through telehealth, home care
and self-management by patients. To
succeed, payers, providers and life sciences
companies will need to bring increased
urgency to the challenge of extending
their business models to build lifelong
relationships with patients.
In fact, in a health care-everywhere
world where patients are empowered
by transparent information, mobile
technologies and online platforms, the
third “place” is wherever the patient
happens to be. It is both every place and
no place. For health care, the third place
is the patient.
Health care’s move to the third place is
being enabled by changing technologies
and changing economic incentives.
Ultimately, however, it is being adopted
because of its game-changing potential
to make health care more efficient and
sustainable — and thereby change the ways
value is created. We explore each of these
drivers next.
The third place:
health care
everywhere
To address the challenge of behavioral
change, the epicenter of the health care
system — how health care is produced,
delivered, consumed and paid for — will
move beyond the two places in which it has
traditionally been delivered, the hospital
and doctor’s office. This involves two
critical shifts:
1. To drive behavioral change by
patients, health care will become
more patient-centric. We are already
seeing the beginnings of this shift.
New technology platforms are
giving patients increased access to
information and greater control over
the management of their health.
Meanwhile, constituents throughout
the health care system — from
providers to payers to life sciences
companies — are attempting to better
understand the behaviors, needs and
preferences of patients.
2. Health care will be delivered in
more dispersed and disaggregated
settings — a change that could make
health care much more sustainable by
enabling more real-time monitoring,
early detection, prevention,
self-management and efﬁcient
usage of resources.
To address the challenge
of behavioral change, the
epicenter of the health
care system — how health
care is produced, delivered,
consumed and paid for — will
move beyond the two places
in which it has traditionally
been delivered, the hospital
and doctor’s office.
The third “place” is wherever
the patient happens to be.
It is both every place and
no place. For health care,
the third place is the patient.

17Chapter one
Power to the people
Today’s health systems need to move from disease care to health
care to reduce the tremendous waste that is endemic in our
health systems. This will involve empowering patients to manage
their own health — to choose preventive actions, engage in real-
time monitoring and more.
Yet, many professionals in the health care business often think
patients cannot handle their health information. Providers, for
example, have typically guarded how much information they give
a patient and discouraged over-the-counter diagnostic tests — the
belief has been that patients would not have enough information
or expertise to make good decisions with the information, or
they would simply be overwhelmed. The result has been a
tremendously asymmetrical relationship between the providers
of health care and the consumers of health care.
In scores of other industries, consumers have been empowered
in ways that we now take for granted but which were
unimaginable at the outset. Fifty years ago, if you told anybody
in the banking industry that people could responsibly use a
machine on any street corner to gain access to their money
and conduct banking transactions, they would have been very
skeptical. They would have worried about consumers making
mistakes and falling victim to fraud.
At around the same time, if you had predicted that consumers
at gas stations would one day actually pump their own gasoline,
you would have been told that that would be incredibly
dangerous and unlikely. After all, gasoline is highly flammable
and potentially explosive.
And who would have envisioned just 20 years ago that travelers
would be able to book a trip around the world on their own —
leaving as soon as the next day — without ever needing to talk
to or meet with a travel agent? Most people would have thought
that travel arrangements are too complicated and that travelers
could not manage the information and make reservations
themselves without making mistakes, or would simply not be able
to identify the highest-quality arrangements for a given budget.
There’s a recurring theme here: when there are opportunities
to give more power to consumers, the established players
often resist on the basis that the consumer lacks the expertise
and resources to handle it. This same conflict now exists in
health care. Empowering and trusting patients with their own
information could unleash huge efficiencies in health care.
There has been a lot of discussion about consumers having
access to their own genomic data. The first thing to note here
is that the portals that have been set up are excellent — the
data is displayed in a way that is very understandable, probably
more so than the average physician’s explanation to a patient.
Also, we must remember that today, HIV and pregnancy
testing — perhaps two of the most life-changing diagnoses — are
available throughout the world over the counter, and the medical
community resisted these, as well. The evidence suggests that
consumers are much wiser and more capable of managing their
own health than is believed.
Another important way to inform patients is to bring
transparency to the health care system; this will introduce a real
marketplace. Consider what a new company, Castlight Health,
is doing to help consumers “find better quality at a lower price.”
Similar to the way shoppers can search Amazon for best buys
on consumer products, patients can use Castlight to search and
find a list of providers for a specific medical treatment, including
information on co-pays and out-of-pocket costs, as well as quality
assessments. Imagine how health care-related behaviors will
change if we enable transparency within the cost and quality of
health care — if it became easy to see that one hospital charged
$4,000 more for a procedure than another one, without any
difference in quality.
As patients are becoming more empowered, access to
information has grown. Just think about the changes we’ve seen
in the last several years — the volume of information available on
the internet and, more recently, new technologies and mobile
apps that are giving more control and information to patients.
Can the transition to this world of transparency and big data
seem overwhelming? Will patients need decision-support tools to
make sense of all this information? Absolutely. We need to help
patients navigate this new world.
But first, we need to trust them with control over their own
information and some degree of medical autonomy. This way, they
can better manage their own health and bring value to the system.
Diego Miralles, MD
Janssen Healthcare Innovation
Head

Changing
technologies
The health care-everywhere revolution is
being enabled by new technologies that
have the potential to take health care
delivery beyond the doctor’s office and
the hospital. From a sea of sensors to
smartphones and social media websites,
these technologies are giving health care
professionals and caregivers the ability to
serve patients in numerous settings, while
giving patients more information and more
control over managing their own health.
Smartphone apps
As we’ve discussed in prior issues
of Progressions, health and medical
apps are among the fastest-growing
categories of apps on smartphones.
There are now thousands of health apps
aimed at consumers on these platforms.
MobiHealthNews predicts that by August
2012, on the iPhone alone there will be
more than 13,000 consumer health
apps and about 6,000 apps aimed at
medical professionals.
Not surprisingly, many of these apps have
so far targeted chronic disease patients,
to enable education, healthy lifestyles,
decision support, disease management,
monitoring, analysis of data, communication
with providers and caregivers and more.
Sensors and monitors
Of course, smartphones are much more
than phones. Their real power comes
from the fact that these mobile computing
devices are packed with sensors —
cameras, microphones, accelerometers,
gyroscopes, GPS sensors. By combining
information from these sensors with the
always-connected nature of smartphones
and tablets, creative app designers have
developed countless new ways of enhancing
our daily lives. Numerous apps, for instance,
allow grocery shoppers to scan an item’s
barcode using their phone’s camera and
instantly find a lower price across the street
or a healthier selection in the next aisle.
Since many of the sensors in smartphones
are related to physical motion, they are
also enabling a slew of health-related
apps. From the RunKeeper app (which uses
GPS data to track runners’ routes, speed,
distance and altitude) to the CrunchFu app
(which uses your smartphone’s motion-
detecting capabilities to create a speaking
physical trainer for stomach crunches),
apps are ingeniously combining all sorts
of real-world data to help consumers with
exercise and more.
While smartphones have been in the
vanguard, the connected-sensor revolution
is by no means limited to these devices.
In last year’s Progressions, we talked
about health care’s move to “the internet
of things.” We continue to see plenty of
evidence of this, as embedded sensors are
transforming all sorts of everyday items
into smart, connected objects that can help
us manage our health. From smart running
shoes, bikes and watches from companies
such as Nike, Wahoo Fitness and Polar to
smart bathroom scales like the Withings
WiFi Bodyscale, sensor-enabled objects can
track distance covered, calories burned, BMI
and a slew of other statistics. Meanwhile,
Ford Motor Company is truly taking health
care everywhere by developing an in-car
health management system with numerous
partners, including Medtronic, Microsoft and
Healthrageous, to monitor vital statistics,
analyze and report data and provide
personalized healthy guidance.
But even as everyday objects are becoming
sensor-embedded and wirelessly connected —
a trend that Eric Dishman of Intel
Corporation refers to as “the medicalization
of consumer devices” — we are starting to
see medical devices evolve to become more
patient-centric and patient-empowering
(“the consumerization of medical devices”).

19Chapter one
The personal health technology revolution
Over the next decade, as much as 50% of health care will shift
from the hospital and clinic to the home and community. New
technologies will drive in-home care, at-workplace care and in-car
care — thereby improving prevention, detection, behavior change
and caregiver support.
A wide range of personal health technologies are coming into
their own — something we refer to as the consumerization of
medical devices and the medicalization of consumer devices.
We will increasingly conduct virtual visits with doctors, nurses
and care coaches through our cell phones, tablets and laptops.
A lot of care can be done in quick snippets — 10 seconds of
interaction with your doctor — and doesn’t require a face-to-face
visit. Cancer patients shouldn’t be sent to germ-filled hospitals for
chemotherapy. It would be far safer and cheaper for them to have
home infusion, but the current system is not set up that way.
An increasing array of diagnostics will conduct real-time
monitoring in our everyday lives. Sensors will look for changes
in how we move to detect neurological risk. Tiny implantable
devices will analyze blood chemistry in real time and let a doctor
know if our drugs are not being metabolized correctly. Not so
long ago, an ultrasound was an expensive device the size of a
cart or a room. Today, it’s quickly becoming a cell-phone-sized
device available to every primary care clinic. As the optics and
technology improve, it could soon become just another app on
a smartphone. In this future, we will no longer have to go to the
diagnostics — the diagnostics will always be available to us.
Another game changer is personalized genomics. The cost of
sequencing a genome has fallen from nearly US$100 million per
genome a decade ago to below US$5,000 today. In a few years,
I expect it to be essentially free. Some clinics will have access
to genomic computing clusters building personalized models
of their patients that doctors will use to design customized
treatments. Clinicians will need decision-support tools to make
sense of all this data and coordinate large patient populations.
Technology can play a key role in enabling behavioral change.
At Intel, we’ve conducted numerous pilots and identified 12
patient segments based on their responsiveness to different
technologies — cell phones, social media, etc. For instance, we
got a group of seniors to dramatically increase their daily walking
by combining social networking, smart pedometers, monitoring
using smart televisions, and incentives they cared about
(e.g., donating money to a preferred cause).
Financial incentives and public policy are starting to catch up. At
Intel, we track health reform in 22 countries, and we see a global
trend toward collective payment — paying groups of providers to
manage the health of a population based on value rather than
volume of procedures. This will take a decade or so to play out,
but it’s a game changer.
New roles and business models
These changes will require new roles and business models
for everyone. Patients and informal caregivers will need to be
educated to empower more remote care and self care, and
information technology and decision-support tools can play a
critical role here. Hospitals will no longer have a business model
based on filling as many hospital beds as possible. Instead,
they will have fewer beds and develop ancillary services in the
community to enable a networked continuum of care. Rather
than being segmented by disease categories, medtech will likely
reorganize into in-home or in-community technology platforms
that can serve multiple disease states. Pharma companies may
acquire new capabilities — software, IT, service delivery — and
become brokers delivering a wide range of care services around a
particular disease state and drug.
These changes will not be easy. Revolutions seldom are. But they
promise a vastly improved future — a health care system with
better quality, increased access and lower costs.
Eric Dishman
Intel Corporation
Intel Fellow and Global Director, Health Innovation

Sensors and sensibilities
Sensors and connectivity
Over its 62-year history, Medtronic has largely developed
implantable and other devices to treat patients with chronic
degenerative diseases. This will remain a high-growth market —
chronic diseases are becoming increasingly important because
of demographic shifts. But I think the biggest opportunities
for medical device companies such as ours are to enhance
our support for patients across the continuum of care — not
just treatment, but also prevention, diagnosis and disease
management — and to expand our business models into patient-
centric services that provide clear customer economic value.
With the convergence of key technologies such as IT software,
telecommunications, data processing power and low-power
technology, we can empower patients across the continuum of
care to remotely manage their devices and health. For instance,
we plan to develop implanted sensors to track blood pressure
data for patients with heart failure and warn patients that are
on harmful trajectories. We can use mobile phone technology to
monitor the blood sugar of diabetics, notify them of significant
changes and educate them on choices and implications. We are
setting up an OnStar-type call center for patients with heart
failure or diabetes where relatives or caregivers could be notified
if a patient’s condition deteriorates.
These technologies provide patients more control and autonomy
in managing their devices. Patients will probably never
reprogram certain implanted devices, such as pacemakers and
ICDs, but they are already managing and adjusting their own
spinal pain stimulators. And we are pursuing a closed-loop
system whereby our sensors will drive an insulin pump and turn it
off when a patient’s blood sugar is falling.
Bottom-line sensibilities
This isn’t just about technology. It’s also good economics — these
approaches will allow us to manage health care in more efficient
and cost-effective ways. Continuous data from wearable and
implantable sensors could improve drug adherence. It could keep
people out of hospitals by identifying patients who are trending
toward hospitalization several days in advance — truly significant
when you consider that a major consumption of health care
dollars in the US ($40 billion annually) is for hospitalized patients
with heart failure.
It’s not just the system that would save money. Hospitals would
benefit, since they are penalized for readmissions within 30
days under the new US health care reform legislation. And
manufacturers could lower the cost of servicing devices, since
programming in numerous situations — new implants, pacer
revisions, operating rooms — could be done remotely instead of
requiring site visits by service reps.
Emerging markets
In many ways, emerging markets are leading the way. Since
insurance is not very prevalent in these markets and patients
typically pay for health care themselves, we are finely attuned to
educating patients, understanding their needs and giving them
the most relevant features at an affordable price. In Beijing, we
have set up our first patient education center — a high-end, high-
touch facility, somewhat like an Apple Store, where patients can
walk in off the street and ask questions about diabetes or heart
failure.
The paucity of providers is similarly driving patient
empowerment. India has 1.3 billion people, but only 90
electrophysiologists. So we simply cannot employ the Western
model of using electrophysiology clinics to manage implanted
pacemakers and ICDs. Instead, we are making the programming,
reprogramming and follow-up of these devices much simpler,
through new systems of data transfer and analytics — providing
both clinical and economic value.
Looking ahead: empowered patients
We are only getting started down this path. Over the next
decade, we will likely see increasingly powerful and ubiquitous
mobile phones further extending a physician’s reach for people
in many parts of the world. Mobile phones will give patients more
control over programming and running implanted devices.
We are moving toward a future with smaller implantable sensors,
patient-controlled mobile devices, real-time data, remote services
that assist patients and caregivers, and more. These trends will
give forward-looking companies new opportunities and revenue
streams. And most important, they will make health care more
transparent and effective for patients and more efficient and
cost-effective for the system.
Stephen Oesterle, MD
Medtronic, Inc.
Senior Vice President for Medicine and Technology

21Chapter one
But the consumerization of medical devices
is only getting started. In two articles on
pages 19 and 20, Dishman and Stephen
Oesterle of Medtronic paint an evocative
picture of what’s ahead — and how
revolutionary it could be. Implanted and
wearable sensors for real-time monitoring
systems will alert remote caregivers or
providers, enabling timely intervention
and saving both lives and money.
Closed-loop systems could even make
adjustments and interventions themselves,
without needing action from human third
parties. Patients will have more control
over calibrating and programming their
implanted sensors and devices, giving
them greater autonomy and flexibility.
As they spread rapidly, these ubiquitous
and untiring sensors will vastly improve
key aspects of health care that are critical
for a more efficient approach to chronic
diseases — exercise, diet, prevention,
monitoring. Imagine the benefits for an
elderly patient of having an implanted
sensor monitor her blood pressure in real
time, regardless of where she is, analyze
it continuously and automatically alert the
patient, caregiver and/or nurse as needed.
The automatic, always-on, always-with-
you nature of mobile technology has the
potential to remove human weakness —
laziness about testing, inaccurate recording
of data — from the equation. Monitoring
becomes continuous. Data becomes more
accurate. Prevention becomes real.
Social media
As discussed in the last two issues of
Progressions, social media are playing a
significant role in empowering patients
with relevant information about their
conditions. Sites such as PatientsLikeMe,
AskaPatient and Healthetreatment
combine the experiences of large numbers
of individual patients, allowing them to
discuss symptoms, treatments, side effects,
statistics and personal experiences with
their peers.
The real power of a site such as
PatientsLikeMe, however, is that it doesn’t
just feature verbal discussions — patients
also enter data about their disease’s
progression on an ongoing basis, and the
site allows users to analyze this aggregated
data in meaningful ways. For instance,
patients can compare their progress against
a cohort of others with a similar profile. If
they are considering a third-line treatment,
they can chart the effectiveness of that
intervention on a relevant subset of patients
that have tried a similar treatment regimen.
The ability to aggregate and analyze data
from social media is now being taken to
the next level. In 2011, First Life Research
launched a new online platform, Treato,
that collects data from multiple social
media websites and uses natural language
processing and artificial intelligence to
identify trends. (For more on First Life
Research and Treato, refer to the article
by Itzik Lichtenfeld, the company’s CEO,
on page 22.) Sickweather, a Maryland-
based start-up, is developing an application
that can forecast regional outbreaks of
numerous indications — influenza, allergies,
ear infection, pink eye and more — by
searching for relevant discussions on social
networks such as Facebook and Twitter.
But social media can do more than provide
patients with relevant data. Since these
platforms are social by design, patients are
not just passive recipients of information.
They can interact with each other, learn
from each others’ mistakes and give each
other feedback and encouragement. This
interactivity and capacity for real-time
feedback can have a powerful effect on
behavioral change — something we discuss
in greater detail in Chapter 2.
Accompanying the proliferation in new
platforms is a rapid increase in consumers’
acceptance of and fluency with these
technologies. A growing body of surveys
continues to demonstrate that consumers
in many global markets are increasingly
comfortable using social media and the web
to access health information. As they get
a taste for the empowerment that comes
with these new technologies, patients’
expectations are changing, and we expect
they will demand even more transparency
and control. In the US, in particular, the
aging baby boomers — the original “me
generation” — will probably have very
different expectations and demand much
more personalized, convenient, in-home
care than prior generations did.
The automatic, always-on,
always-with-you nature of
mobile technology has the
potential to remove human
weakness from the equation.
Monitoring becomes
continuous. Data becomes
more accurate. Prevention
becomes real.
As they get a taste for the
empowerment that comes
with these new technologies,
patients’ expectations are
changing, and we expect
they will demand even more
transparency and control.

Listening to patients
Today, patients are participating in — literally — billions of
health-related discussions online. Yet, so far, there has been no
way to aggregate patient voices across multiple websites and
understand the bigger picture. In September 2011, First Life
Research launched its social media search platform, Treato, to fill
this gap. Treato uses “big data” technology to collect enormous
amounts of data from social media sites and, with advanced
natural language processing, analyzes this information, connects
the dots and creates the big picture of what patients are saying
about their medications and conditions. For example, we can
pinpoint the top patient concerns for virtually any FDA-approved
drug, identify drug switching patterns and unearth often-
surprising insights on side effects and off-label use.
Just two months after our launch, we had analyzed more than
1 billion posts. This is the first time that the social health web
has been indexed on such a massive scale. The Treato site
currently covers 13,000 conditions and 11,000 medications,
with information aggregated and categorized in an easy-to-
understand format.
We believe the site will revolutionize how stakeholders share
information and make health care decisions. Treato’s insights
stem from real-life patients and their real-time experiences. By
providing access to our knowledge base, we are empowering
stakeholders along the health care value chain — certainly
patients, but also physicians, health maintenance organizations,
life sciences companies and others — to better understand
patients and their experiences.
A patient-centric business model
Currently, our business model is built on offering a completely
free-of-charge, and free-of-ads, service. We will generate revenue
by developing partnerships with entities along the health care
value chain that have a constant need to understand patient
motivations — for example, pharma companies, HMOs,
drug-related research groups, and insurance and financial
companies. We will provide them with in-depth analytics
and tracking capabilities to better leverage the power of this
information.
Our value proposition is based on patient centricity. Ultimately,
patients know best how they react to the medications they have
been taking. With access to the experience of other patients,
site users can better understand how to navigate their medical
conditions and their medications. Also, if they are considering
switching brands, they can easily compare competing
medications. Access to this information empowers not only
patients to manage more of their health care themselves but
also physicians and drug companies to hone their focus on
patient-centric care.
Listening to your customers
Treato offers the opportunity for life sciences companies to
better understand the effectiveness, side effects and interactions
of their products. Even though the industry has invested
considerable time and effort in rigorous clinical trials, results are
typically limited to a sample size of a few hundred or a thousand
subjects at best. Consequently, when a product hits the market,
many side effects are unknown. We are providing, in essence, the
world’s largest focus group.
Today, strong currents are shifting the life sciences industry
in new directions. Personalized medicine is tailoring medical
treatment to the genetic profile of the individual patient. At the
same time, technology platforms such as Treato are leveraging
the “wisdom of crowds” to provide more meaningful real-time
data on patient experiences with medical interventions. These
trends will reinforce each other, accelerating the move to
micro-targeted health care. This should increase the efficacy of
products and reduce side effects — leading to better outcomes for
patients and a more efficient health care system for all.
Itzik Lichtenfeld, PhD
First Life Research Ltd.
Co-founder and Chief of Innovation
leveraging the
“wisdom of crowds”
iences Report 2012

23Chapter one
From insights to outcomes
Ernst & Young: How is Allscripts positioned as health care
systems focus increasingly on health outcomes?
Tullman: Today, many industry observers have a negative
assessment of health care delivery, believing that — with costs
higher and quality lower — we are at the beginning of the end of
health care as we know it. At Allscripts, we see things differently.
To paraphrase Sir Winston Churchill, we believe we are at the
“end of the beginning.” In our view, we’re in the first stages of
enormous innovation and progress, similar to the days when the
internet was just starting to take hold.
We are rapidly moving from not having enough information to
having too much. For information to be useful, it will need to
be radically simplified and presented in a way that health care
providers can use to truly improve patient care, at the right point
in the care process.
Allscripts is today one of the largest providers of electronic
health records (EHRs) in the United States. The fact that we have
solutions across the entire continuum of care — which means
physician offices, hospitals and post-acute care — positions
Allscripts to deliver the insights that will lead to better health
outcomes. It’s a concept we call “insights to outcomes,” or i2O.
We are focusing on i2O to promote adoption and meaningful use
of EHRs, delivering real, actionable insights to physicians and
caregivers at the point of patient care. It is these insights that
will drive better clinical and financial outcomes — and ultimately
usher in a new age for health care. We believe that health care is
fundamentally an information business, which is different from
many of our competitors who simply want to sell software.
Ernst & Young: How important is patient centricity in your
company’s strategy and approach?
Tullman: Patients are indeed taking more control over their
health, getting better information up front to stay healthy. The
challenge is, how can they best interact with the health care
system to make sure they are understood? At Allscripts, we
have developed a series of patient-focused information tools
and offerings. For example, we have partnered with Intuit to
codevelop and distribute a patient health portal. On the financial
side, patients can connect with their physicians and conduct
almost all their business electronically, from registering for
appointments to paying bills. On the clinical side, they can
receive follow-up information directly from their physicians (for
example, lab results) without having to call. Also, our systems
are being used more and more in environments that enable
physicians to provide telehealth and telemedicine. These patient-
centric technologies, in their ability to engage patients clinically
and financially, and to create highly efficient processes, are key
to our future strategy and to the future of health care delivery.
Ernst & Young: What is your prognosis for meaningful
adoption of EHRs?
Tullman: We view the federal government’s stimulus plan for EHRs
as an intelligently designed policy initiative. It offers incentives to
providers not only to purchase the technology for EHRs but also
to use the technology to produce quality data that demonstrates
they are actually improving care. Adoption is increasing, physician
behavior is changing, and we’re seeing the beginning of substantial
improvements in quality and efficiency.
Within this decade, we expect the health care industry will be fully
automated. The banking industry provides an interesting parallel.
When ATMs were introduced, they were disconnected networks.
We had to search for an ATM that would accept our cards. Now we
can go virtually anywhere in the world, use almost any machine,
and in a few seconds, withdraw cash in any currency we want.
Eventually, we will be able to go anywhere in the world and access
our health information. Just as we are unlikely to choose a bank
that doesn’t have an ATM network, we will be unlikely to choose a
physician who doesn’t use EHRs that are connected to the network.
Ernst & Young: What might health care look like 10 years
from now?
Tullman: As the British futurist Arthur C. Clarke said, “any
sufficiently advanced technology is indistinguishable from magic.”
The disconnected health care system of the past will soon be a
relic, and the new norm will be a highly accessible, interactive
and bidirectional information system. We’ll see an explosion of
innovation in health care apps, just as we saw when the internet
finally connected us. Information technology is the singular tool
that has enabled us to prosper in every other industry. Health care
is our last frontier, and what will change over the next decade, in
my view, is everything.
Glen Tullman
Allscripts
CEO
health care is fundamentally
an information business

Changing incentives
Even as new technologies are rapidly
emerging that could take health care into
the third place, changing incentives are
increasing the attractiveness of more
dispersed and patient-centric approaches.
Systemic reforms
In response to the challenge of escalating
costs, payers and policy makers globally are
experimenting with different solutions to
make health care more sustainable. Despite
the diversity of approaches in key markets
around the world, these reforms typically
have some combination of a couple of
key characteristics:
Holistic care. A key reason for cost
inflation is that health care delivery is
fragmented and inefficient. Providers
often do not coordinate care well with each
other, much less with other parts of the
system. Care is fragmented across time as
well — for example, when patients change
jobs, carriers or doctors. To fix this, most
solutions attempt to encourage a more
coordinated approach across organizational
silos and over time. And they frequently
encourage a more central role for primary
care physicians, since these doctors could
play a critical role in coordinating care.
Payment reform and risk sharing. Payers
are also gravitating to approaches that
pay for quality and outcomes rather than
quantity and procedures — value instead
of volume. A common element in many of
the pilots is the transfer of more financial
risk to providers and/or patients. By doing
this, payers are seeking to address a key
structural problem driving cost inflation: the
mismatch between incentives and
influence. In most industries, the customer
makes purchasing decisions, consumes the
product or service purchased and pays for
the purchase. In health care, however,
these three functions are performed by
different segments:
• Providers make purchasing decisions but
have little incentive to influence cost in a
fee-for-service environment.
• Patients, the ultimate consumers of
health care, are theoretically in an ideal
position to influence health care costs by
adopting healthy behaviors and having
a say in their treatment. However, in
developed markets, they have had little
incentive to behave differently, since
they are often shielded from the financial
impact of purchasing decisions by
subsidized health insurance and relatively
small co-payments. Compounding the
challenge, they have historically not had
access to transparent information on
price and quality.
• Payers and/or employers, on the other
hand, have every incentive to lower
health care costs but historically haven’t
had a lot of influence over purchasing
decisions and patient behaviors, since
they are somewhat separated from the
actual delivery of health care.
The bottom line is that the parties with
influence over health decisions and
behaviors have had little incentive to
seek efficiency, while those with the
incentive have had little influence. To fix
this fundamental mismatch, payers are
experimenting with reforms that seek to
share financial risk with providers. Under
capitation approaches, for instance, payers
pay providers a fixed sum to cover an
individual for a specific period of time.
Similarly, bundled payments (also known as
episode-based payments) are approaches
in which payers constrain payments based
on expected costs for clinically defined
episodes of care. There are also measures
under way to shift more of the risk directly
to patients, such as charging higher
premiums to employees who smoke or
engage in other unhealthy behaviors.
Multiple models
The drive to encourage more coordinated
care and transfer financial risk is playing out
with a new sense of urgency through visible
reform models currently being rolled out.
In the US, for instance, there is a focus on
accountable care organizations (ACOs) — a
model under which a group of coordinated
providers is responsible and rewarded for
holistically managing the quality, cost and
care of a group of patients. Another model
that has been getting attention is the
patient-centered medical home (PCMH), an
approach that emphasizes comprehensive
care, including an ongoing relationship with
a personal physician across all stages of a
patient’s life and coordination with various
providers.
The bottom line is that
the parties with influence
over health decisions and
behaviors have had little
incentive to seek efficiency,
while those with the incentive
have had little influence.

25Chapter one
a closer lookAlready, there are numerous examples of
entities experimenting with such models.
Insurance giant UnitedHealthcare is piloting
an episode-based payment model for
cancer with five medical oncology groups
across the US. The Merck Foundation and
Camden Coalition of Healthcare Providers
are converting 10 primary care practices
into PCMHs in New Jersey. And Aetna has
launched pilots in Connecticut and New York
to pay physicians to make house calls.
Meanwhile, in the UK, reforms proposed
by the current government would abolish
“primary care trusts” (public sector entities
that provide services on behalf of the
National Health Service) and transfer their
funding to groups run by primary care
physicians. These clinical commissioning
groups (CCGs) will give doctors more control
over the budget and responsibility for
arranging care for their patients.
All reforms lead to the third place
The reform measures described above
increase the imperative to make health
care delivery more ubiquitous and
patient-centric. Models that call for more
holistic health care delivery, for instance,
will increase the impetus for remote
care, preventive monitoring and more.
Meanwhile, payment regimes that shift
financial risk to providers will require them
to efficiently improve patient outcomes
to manage that risk — driving them to get
closer to patients and understand how to
change their behaviors.
The fact that payers are encouraging
more patient-centric approaches will also
have implications for the ways in which
companies approach market access. (For
more on this subject, see the article by
Frank Kumli to the right.)
The political debate around health care
reform can be volatile and unpredictable,
but regardless of the vagaries of public
opinion and policy making, the third place
is increasingly inevitable, for the simple
reason that it promises huge boosts in
efficiency and sustainability.
As pricing pressures mount and payers look for ways to bring health care costs under
control, life sciences companies’ focus on market access — their strategy and approach for
entering and maintaining a presence in the market — has become increasingly critical.
Health care’s move to the third place raises a number of questions around market access.
How does the increase in patient centricity affect the traditional relationship with payers?
What does market access mean in a patient-centric world? And, more broadly, how does
market access need to change as the focus moves from traditional products to health
outcomes that are delivered with the involvement of multiple stakeholders?
Understanding and working closely with patients has always been critical to market access,
and this will only become more important in the third place. For instance, the companies
most likely to succeed in many risk-sharing agreements (e.g., approaches in which firms
only get paid for patients responding to their treatments) are those armed with personalized
medicine approaches to target the most responsive patients. This understanding of patients
will need to extend beyond genomic factors to include behavioral and environmental
determinants of health outcomes.
More broadly, a successful approach to market access requires understanding the factors
that are most valued by the key stakeholders in each local market — payers, providers,
patients, policy makers, etc. These “value dimensions” need to be integrated back
throughout the value chain to shape decision-making, as early as in drug or business model
development through to the launch and life cycle management phases. And they need
to be further segmented to account for variance across geography, therapy areas and
position in the product’s life cycle — to allow companies to better understand and influence
key stakeholders. In the third place, as patients become more empowered and involved in
their own care, understanding their needs and values will become increasingly imperative.
Understanding the local enabling infrastructure becomes critical when new business models
rely on social media platforms, electronic health records, telecommunications networks or
wireless networks. It is essential to understand the level of deployment of the infrastructure
in place, how it will evolve, who the key stakeholders are and what the associated
regulations are (e.g., on data privacy).
Based on this in-depth understanding, effective interaction strategies need to be developed
with an overarching goal of building positive and sustainable relationships. Points of
interaction must be considered along patient pathways beyond interacting directly with the
health care patient, to areas such as building disease awareness and interacting closely with
patient organizations or key opinion leaders.
A third-place approach to market access will also require a more comprehensive shift on
the part of payers. Most payers are still focused on products rather than outcomes. While
there are some pockets of change (e.g., accountable care organizations in the US), payers
have not broadly adopted processes and metrics to measure and reward new models that
improve health outcomes through a combination of products and services. Life sciences
companies and their associations must engage critical stakeholders — from payers to policy
makers, health care providers to patient organizations, technology players to retailers — in
codeveloping relevant processes and metrics.
The ultimate goal is an agreement with payers on the listing, pricing and reimbursement of
the product or product-service combination. As service components are added to the business
model, complexity increases, but also new opportunities arise, expanding the range of possible
agreements beyond pricing or risk-sharing schemes to health management and capitation.
Frank Kumli, PhD
Ernst & Young Ltd.
Accessing the markets of the third place

• Personalization everywhere. In recent
years, we have seen more life sciences
companies adopt personalized medicine
approaches. It’s easy to appreciate
why — the widespread use of targeted
therapeutics and companion diagnostics
could completely revolutionize health
care. Using biomarkers to identify
subpopulations that are most likely to
respond to targeted drugs has enabled
significantly more efficacious treatment
regimens for several types of cancer.
Similarly, the early identification of
biomarkers has the potential to make R&D
considerably more focused and efficient.
Yet, these approaches only go so far.
After all, genetic factors are not the only
determinants of disease — behavioral and
environmental factors play a significant
role. The patient-centric approaches of
the third place now have the potential
to take personalized medicine beyond
genetics and into the realm of behavior
as well. And just as genetic personalized
medicine promises to make the process
of drug innovation more productive
and efficient, behavioral personalized
medicine has the potential to do the
same for both product and business
model innovation.
At a time of patent expirations and
mounting pricing pressures, finding growth
opportunities has become increasingly
challenging. The good news is that the third
place will not be a shrinking market, but
rather a growing one. The transition will
not always be easy, but once companies
are comfortable delivering in the third place
and the health care system is more aligned
around wellness and prevention, the market
should expand dramatically.
Changing the game
Here are some ways in which health care’s
move to the third place could make the
system radically more efficient, sustainable
and valuable to all stakeholders:
• Efficient resource usage. By definition,
boosting efficiency involves increasing
output per unit of input. In other sectors
of the economy, this has often been
achieved through specialization (e.g.,
international trade and modern supply
chains), which puts each resource to its
highest and best use, as well as through
technology, a force multiplier that allows
each worker to produce more output.
Third-place technologies and
specialization have the potential to
increase efficiency across the spectrum
of health care delivery. As we move to
an outcomes-focused system, one of
the scarcest resources in health care will
be the primary care physician. These
doctors are already in short supply in
many markets, and they will be even
more critical in the future.
Third-place technologies have
tremendous potential to allow primary
care physicians to take on an expanded
role. Instead of being limited by the
number of in-person appointments a
workday can accommodate, doctors
will be able to use remote-care
technologies to interact with larger
numbers of patients as well as relegate
routine monitoring to new generations of
real-time sensors. As more coordinated
care is encouraged by health care
reform models, a wider spectrum of
medical professionals — registered
nurses, medical assistants, pharmacists
and others — can take over more of the
lower-risk tasks currently performed by
primary care physicians, freeing doctors
for higher-value work. As an example of
this, Walgreens’ new strategy will enable
pharmacists to spend more time working
up to the level of their license.
(See the article by Alexandra Jung on
page 66 for details.)
• Transparency. Efficient and competitive
markets thrive on transparent
information. Platforms such as social
networks, educational websites and
smartphone apps are making all sorts
of health information more accessible
and transparent for patients. This trend,
coupled with changing incentives that
bring patients closer to the economic
consequences of their actions, should
drive health care’s ultimate customers to
make more optimal choices.
• Coordination and prevention. The move
to the third place will bring different
incentives and new technologies to
enable more focus on prevention and
coordinated models for care. Such
holistic approaches promise to make
health care much more sustainable and
efficient, since prevention, real-time
monitoring and timely intervention
are typically many shades more
cost-effective than treatment or
hospitalization.
• Increased access. Policy makers in many
key markets are attempting to expand
access to more of their citizens even as
they grapple with the need to bring costs
under control. These two contradictory
impulses can only be reconciled if health
care becomes much more efficient. Third-
place technologies and approaches will
directly expand access for underserved
patients (e.g., in rural areas and
developing countries) through telehealth
and mobile health offerings.
Third-place technologies
have tremendous potential
to allow primary care
physicians to take on an
expanded role.
The patient-centric
approaches of the third place
now have the potential to
take personalized medicine
beyond genetics and into the
realm of behavior.

27Chapter one
Getting ready for
the third place
In the final analysis, three facts stand out.
First, health care as presently delivered is
unsustainable. Second, we are witnessing
an explosion of third-place technologies
and platforms that could radically boost
sustainability and outcomes. And third,
health care “superconsumers” will
increasingly demand more personalized
approaches. Against those three trends,
much of the back-and-forth of health care
reform — the details of individual models,
the unpredictability of the political debate —
is just so much background noise. One way
or the other, health care is moving to the
third place. As a society, we cannot afford
for it not to.
This raises some key questions for life
sciences companies. First, if companies’
success will increasingly hinge on their
ability to influence patient behaviors, how
can they succeed in this endeavor? After
all, despite heartfelt motivation and ample
information on healthy diet and exercise,
patients are often simply unable to change
their ways. The problem is that they have
inherent decision-making biases that
often prevent them from changing their
behaviors. To succeed in the third place,
therefore, it will be critical for companies to
understand how patients think and design
offerings that account for human biases.
These issues are explored in considerable
depth in Chapter 2, where we draw on
behavioral economics, a field that is rich in
actionable insights.
But the third place is not just a new
place — it’s an entirely new way of business.
Companies that have always sold products
or services will now find themselves in
the business of changing behaviors and
delivering outcomes. They will consequently
need to shift from a product-centric,
business-to-business focus to one that is
customer-centric and business-to-consumer.
The value of companies’ brands will be
determined not just by product efficacy but,
more importantly, by customer experience.
All of this raises a second critical question:
how can companies change and extend
their business models to enter entirely new
lines of business and be at the front lines as
new markets are created? How can leaders
become change agents — marshaling
resources and staying the new course
to create the market of the future? It’s a
challenging task — many great companies
foundered because they saw the trends
but were unable to change their business
models in time. In Chapter 3, we draw
insights from other industry sectors that
have undergone similar shifts and offer a
path forward.
Lastly, success will also involve coordinated
change and collective intent with other
constituents of the health care ecosystem.
Successfully influencing patient behaviors
will require bringing together drug and
device companies, providers, patients and
others. It will involve synchronization with
One way or the other, health
care is moving to the third
place. As a society, we cannot
afford for it not to.
payers to develop meaningful incentives
and payment mechanisms. It will even
involve rethinking what is precompetitive.
In Chapter 4, we discuss how companies
develop a coordinated approach to change
by using the mechanism of collective
impact alliances.
Although the third place might seem
futuristic and improbable to some today,
it is instructive to see how the forces of
technological, demographic, political and
social change over the last half century
have transformed what was essentially
a chemical sector into the life sciences
industry of today. At a DesignShop®
that we
hosted in September 2011 with industry
executives to validate some of our ideas for
this year’s report, we took a look at “the
history of the future” — charting trends that
got us to today’s health care system and
identifying what might lie ahead. It’s been
an incredible journey so far, and it’s starting
to get even more interesting.
Welcome to the third place. •
3rd
from product-centric
to customer-centric

The history of the future

29Chapter one
Source: Graphic recording of DesignShop®
session held on 27 September 2011, drawn by Drew Dervanich of Optum DesignShop.

haptertwo
Patients: nudging
patient behavior

31Chapter two
Chapter 2
Patients: nudging patient behavior
In the US, as many as 50% of prescriptions
are never filled, and only 25%–30% are
taken properly. The Center for Health
Transformation estimates that non-
adherence leads to $290 billion in direct
and indirect health care costs annually —
an astonishing 13% of total US health care
expenditures. Unhealthy lifestyles cost
health systems across the world billions
more. In the US, obesity increases costs by
$215 billion annually. Smoking costs the
UK health system £6.6 billion–£7.4 billion
a year. Alcohol abuse costs the European
Union €125 billion a year.
In each of these cases, simple behavioral
changes by individuals could save health
care systems enormous sums of money.
These changes will also be increasingly
important for companies looking to play
in the behavioral change business. Yet,
these seemingly minor adjustments, while
perfectly obvious, remain elusive, and
these behavior-related problems have
stubbornly resisted attempted fixes
for decades. To understand why — and
identify solutions that might finally tackle
these persistent challenges — we turn to
behavioral economics.
In brief
• Getting patients to adopt healthy
behaviors represents a tremendous
economic opportunity for life sciences
companies and health care systems,
but this has been extremely difficult
despite patients’ best intentions.
• Behavioral economics demonstrates
that the reason people fail to make
behavioral changes is that they have
predictable biases that affect decision-
making. Leveraging the science of
behavioral economics to understand
human biases allows companies
to construct incentives and create
products/services that are far more
likely to succeed.
• To help patients adopt healthy
lifestyles, companies can use
behavioral economics levers through
technologies, social networks,
gamification and contracts. A number
of pilots and start-ups have creatively
combined multiple behavioral levers
to achieve significant improvements
in household savings, drug adherence,
weight loss and exercise.
• To help patients process information
in areas where there is considerable
uncertainty and an overabundance
of data, companies need to focus on
communicating in clear and neutral
ways. Individual preferences will need
to be kept in mind, instead of aiming
for a one-size-fits-all solution.
• We offer five guiding principles for
companies in the behavioral change
business:
1. Communicate clearly
2. Account for individuals’
preferences
3. Learn from behavioral economics
4. Experiment and be flexible
5. Extend your business model

We’re only human
Over the last decade or so, a remarkable
revolution has swept the field of economics.
When Daniel Kahneman won the 2002
Nobel Prize in economics, many were
surprised to learn that the laureate was not
an economist but a professor of psychology,
one who, by his own admission, had never
taken an economics course.
A few years later, when several books
on relatively obscure academic matters
became worldwide bestsellers that were
translated into scores of languages, it was
noteworthy that the authors wrote about
similar topics but came from very different
disciplines. Stumbling on Happiness, for
example, was written by Daniel Gilbert,
a professor of psychology; Predictably
Irrational was authored by psychologist/
marketing scientist Dan Ariely; and Nudge
was written by economist Richard Thaler
and legal scholar Cass Sunstein. These
bestsellers succeeded in capturing the
public imagination because they led readers
to question matters as fundamental as
how well we know our own minds, how
capable we are of making decisions that are
in our best interests, and even how valid
our often unblinking faith in free markets
is. The questions these books explore —
originally seeded by the work of Kahneman
in the 1970s — are the realm of behavioral
economics, which lies at the intersection of
psychology and economics. Traditionally,
microeconomic theory has assumed that
individuals are rational actors — i.e., they
behave in ways that balance costs against
benefits to maximize utility or personal
advantage. In recent years, behavioral
economists have shown repeatedly that this
basic tenet — the foundation for decades of
economic theory — is fundamentally flawed.
We are irrational in multiple ways, because
of inherent biases that prevent us from
making utility-maximizing decisions.
We have a status quo bias that leads us
to passively accept the default option
rather than actively seeking the option
that would maximize our utility — and so
participation rates for everything from
retirement accounts to organ donations
differ dramatically depending on whether
the default option on enrollment forms is
an “opt out” or an “opt in.” A bias for the
present leads us to excessively discount
large payoffs in the future (e.g., a secure
retirement, a longer and healthier life),
even relative to small sacrifices today
(e.g., saving and exercising). We tend
to exaggerate small probabilities, which
is why lotteries are a booming business
(and the joke about a lottery being a tax
on people who are bad at math may have
empirical validity). Meanwhile, the well-
documented loss-aversion bias means that
the displeasure from losing $100 is much
more than the pleasure experienced from
gaining $100 — something that is visible in
everything from how investors respond to
stock market losses to how players make
bets on Who Wants To Be A Millionaire?
What makes behavioral economics a
rich source of potential solutions, rather
than a disheartening inventory of human
shortcomings, is the fact that these biases
are systematic and unidirectional. To
paraphrase the title of Ariely’s book, we
are irrational, but predictably so. And the
predictability of our biases means that we
can correct for them. Indeed, our biases
are already being exploited to work against
us — for instance, in the ways companies
advertise their products and price their
wares, which are frequently designed to
entice us to bad decisions. What if health
care could turn that model on its head?
What if key constituents — companies, policy
makers, payers — could align their interests
with patients and create mechanisms that
use these biases not to exploit patients but
to “nudge” them toward better behaviors
and outcomes?
These are particularly relevant questions
for today’s rapidly changing health care
ecosystem. As we pointed out in Chapter 1,
many of the biggest health outcome
improvements in the future will come
from behavioral change. Incentives
are already changing to better align
institutional interests with those of patients.
Stakeholders across the system — from
payers and providers to employers and
product companies — are developing
programs and technologies that encourage
and enable healthy behaviors. But they are
not always successful. For instance, when
a primary care trust in the UK offered cash
payments to volunteers who signed up for
a year-long “Pounds for Pounds” trial in
2009, only a quarter of participants finished
the course, and two-thirds failed to reach
their weight loss targets.
We are irrational, but
predictably so. And the
predictability of our biases
means that we can correct
for them.

33Chapter two
Indeed, behavioral economics research
is replete with examples of incentives
that counterintuitively produced results
dramatically different from what the
framers had intended. For instance, while it
may seem common sense that imposing a
fine for undesirable behavior would serve as
a deterrent, under certain circumstances,
it can have the opposite effect. When day
care centers in Haifa, Israel, decided to
fine parents for late pickups, the number
of incidents of tardiness actually doubled.
The reason is that, in the absence of a fine,
parents were deterred by “social norms” —
appearing inconsiderate, inconveniencing
teachers, etc. But once fines were
instituted, they began to operate under
“market norms” and viewed the fine as an
inconvenience fee with which they could buy
the option of being late.
Similarly, while many companies are now
experimenting with approaches where
employees who engage in unhealthy
behaviors (e.g., smoking) are charged
higher health insurance premiums,
behavioral economics suggests that these
experiments may not always succeed.
For instance, an article by four behavioral
economists (Kevin Volpp, David Asch,
Robert Galvin and George Loewenstein)
in the New England Journal of Medicine
(4 August 2011) points out that, because
people place excessive weight on the
present relative to the future, annual
premium adjustments may not be very
effective because the consequences are
delayed. Instead, “incentives should provide
small but tangible and frequent positive
feedback or rewards.” In addition, because
of how people account for monetary
receipts or payments, “the effect of rewards
(or punishments) diminishes when they’re
bundled into larger sums of money: a $100
discount on premiums may go unnoticed,
whereas a $100 check in the mail registers
as an unexpected windfall.” (For more
on behavioral economics and its potential
to influence patient behaviors, refer to
the interview with George Loewenstein
on page 37.)
As participants across the health care system
work to align incentives, metrics and policies
to incentivize healthy behaviors, it is critical
that they learn from behavioral economics.
This includes issues of incentive design (the
size of monetary carrots and sticks, payment
mechanisms, frequency of feedback, etc.) as
well as choice architecture (default options,
presentation, labels and wording, etc.). For
incentives to work, they need to account
for the often counterintuitive biases and
preferences of real patients — who, after all,
are only human.
As participants across the
health care system work
to align incentives, metrics
and policies to incentivize
healthy behaviors, it is
critical that they learn from
behavioral economics.
Gaps in patient
behaviors
Let’s start by identifying the ways in which
patients behave suboptimally. We can group
these behaviors into two significant areas:
(1) Processing information
Traditionally, one approach to shortcomings
in patient behavior has been to view the
problem as an information gap. The term
“patient literacy,” for instance, implies
that patients are simply uninformed. If this
were the extent of the problem, it would
be easy to fix. Indeed, the internet has
already made transparent huge amounts of
information that were once opaque, and has
given patients ready access to the latest in
medical thinking.
Of course, the problem is more complex. For
one, the issue is not information per se but
relevant and actionable information —
a point eloquently argued by Thomas
Goetz of Wired magazine in an excellent
TED talk (January 2011) on the subject
of medical information. Goetz identifies
one area where patients have successfully
been nudged to change their behaviors
over time — dental hygiene — and points to
research suggesting that success requires a
feedback loop based on personalized data.
The positive loop starts with giving patients
information that is personalized to their
circumstances and helping them understand
how this information is relevant to them.
It is then critical to show patients what
choices they have based on this information
and the corresponding trade-offs. If
these elements are in place, patients feel
empowered to take appropriate actions —
resulting in behavioral change; the cycle
then repeats leading to further changes in
behavior, and so on.
relevant and
actionable information

34
Make it colorful
The ubiquity of color
printers, email, and PDFs
means there’s no excuse
not to use one of the
most effective tools in
information design. We
adopt a familiar green-
yellow-red palette to
make it easier to identify
what needs immediate
attention.
Make it easy
Listing various “reference
ranges” on the right of
the page, separate from
the results, forces the eye
to scan back and forth as
you evaluate the numbers.
We add charts that depict
clearly and succinctly
where you fit along the
spectrum.
Make it simple
This printout is just the
first of four dense pages.
The original lists dozens of
measurements, potentially
too many for even a
doctor to comprehend.
We summarize the more
esoteric tests, focus on the
most relevant numbers,
and add an overview at the
top of the page.
Make it clear
Doctors presumably
know what high or low
numbers might mean. But
there’s no reason not to
augment the data with
qualitative interpretations
for all results above and
below “normal.” Are your
numbers a little low or a lot
low? We explain.
Make it relevant
Information is useless
without explanation and
a call to action. So we
augment this patient’s
results with the relevant
health risks and offer
guidance about what
the patient might do to
improve her health.
Before and after: Wired magazine redesigns the lab report
The basic workup
The standard blood workup takes more than 30 measurements and can go on for more than four pages. All sorts of things can turn up
in the report; the challenge for physician and patient alike is to find the signal within the noise.
Source: Reproduced with permission from “Blood Simple,” Wired, December 2010.

A companion article in Wired (December
2010) provides a compelling example of
how information could be redesigned in one
area of the health care system — diagnostic
laboratory results — to communicate
information in a more clear and personalized
way to patients. With a little effort, the
authors transform a fairly incomprehensible
jumble of acronyms and numbers into an
elegant and concise presentation using
color, charts and graphics to quickly provide
context, and add additional personalized
information on how to interpret the results
and what actions the patient can take.
The difference between the “before” and
“after” could not be more stark.
(See pages 34 and 35.)
Many payers could learn a thing or two from
these examples as well. Many US patients,
for instance, are completely bewildered
by the perplexing arrays of numbers and
jargon on the ironically named “explanation
of benefits” reports they receive following
a medical treatment. If they are truly
interested in encouraging patients to make
better medical choices, insurance companies
will need to make this information more
transparent and comprehensible —
borrowing a page from the likes of the
banking industry, which has made huge
leaps in presenting personal financial
information in simple and engaging ways.
We are likely to see similar pressures
on drug company communications. For
instance, Goetz presents a direct-to-
consumer magazine advertisement and
then singles out for criticism the dense
information that is typically packed on
the reverse page. “This is one of the most
cynical exercises in medicine,” he says.
“Who among us would say that people
actually read this? And who among us
would say that people who do try to read
it actually get anything out of it?” Once
again, he presents an alternative: the “drug
facts box” developed by Dartmouth Medical
School physician-researchers Lisa Schwartz,
Steven Woloshin and H. Gilbert Welch,
that takes inspiration from the nutritional
information box that the FDA requires on
food packaging.
The information challenge is compounded
in issue areas where there is considerable
uncertainty. Consider the distinction
between puzzles and mysteries, as
highlighted in an article in The New Yorker
by Malcolm Gladwell (8 January 2007).
Unlike puzzles, which have a single,
straightforward solution that can be arrived
at once we have enough information,
mysteries “require judgments and the
assessment of uncertainty, and the
hard part is not that we have too little
information but that we have too much”
[emphasis added].
In many ways, this is exactly what is
happening in some areas where modern
medicine has become a delicate act of
weighing probabilities amid tremendous
uncertainty. For instance, screening for
some types of cancer (e.g., prostate and
breast cancer) remains controversial and
divisive because it is not clear how to
interpret the costs and benefits of early
testing. A recent book by Jerome Groopman
and Pamela Hartzband, Your Medical Mind,
walks through such dilemmas from the
perspective of individual patients. The
authors — doctors at Beth Israel Deaconess
Medical Center who also teach at Harvard
Medical School — present a decidedly
patient-centric perspective that sometimes
challenges notions of rationality in health
decisions. They point out that seemingly
irrational decisions often stem from
reasonable patient preferences. Deciding
on an “optimal” intervention implicitly
or explicitly involves taking into account
the utility or disutility a patient would
experience from different outcomes — and
these calculations differ across individual
patients (and indeed across individual
physicians). For an individual patient, the
disutility from a drug’s seemingly minor
side effect may be more significant than a
promised small reduction in the risk of an
adverse event.
The information challenge
is compounded in issue areas
where there is considerable
uncertainty.

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